Annual report pursuant to Section 13 and 15(d)

Securities

v3.6.0.2
Securities
12 Months Ended
Dec. 31, 2016
Investments, Debt and Equity Securities [Abstract]  
Securities
Securities
The following is a summary of securities available for sale as of December 31, 2016 and 2015:
 
Amortized
Cost
 
Gross
Unrealized
Gain
 
Gross
Unrealized
Loss
 
Estimated
Fair Value
 
(In thousands)
December 31, 2016
 
 
 
 
 
 
 
Mortgage-backed securities (1) (2)
$
230,489

 
$
598

 
$
1,457

 
$
229,630

Collateralized mortgage obligations (1)
77,447

 
6

 
1,002

 
76,451

U.S. government agency securities
7,499

 

 
58

 
7,441

SBA loan pool securities
4,356

 

 
210

 
4,146

Municipal bonds-tax exempt
159,789

 
236

 
1,995

 
158,030

Municipal bonds-taxable
13,391

 
319

 
9

 
13,701

Corporate bonds
5,010

 
5

 

 
5,015

U.S. treasury securities
156

 

 

 
156

Mutual funds
22,916

 

 
522

 
22,394

Total securities available for sale
$
521,053

 
$
1,164

 
$
5,253

 
$
516,964

 
 
 
 
 
 
 
 
December 31, 2015
 
 
 
 
 
 
 
Mortgage-backed securities (1) (2)
$
286,450

 
$
392

 
$
2,461

 
$
284,381

Collateralized mortgage obligations (1)
97,904

 
79

 
997

 
96,986

U.S. government agency securities
48,478

 

 
656

 
47,822

SBA loan pool securities
63,670

 
7

 
411

 
63,266

Municipal bonds-tax exempt
162,101

 
1,820

 
19

 
163,902

Municipal bonds-taxable
13,932

 
189

 
88

 
14,033

Corporate bonds
5,017

 

 
24

 
4,993

U.S. treasury securities
159

 
1

 

 
160

Mutual funds
22,916

 

 
163

 
22,753

Total securities available for sale
$
700,627

 
$
2,488

 
$
4,819

 
$
698,296

 
 
(1)    Collateralized by residential mortgages and guaranteed by U.S. government sponsored entities.
(2)
Include securities collateralized by home equity conversion mortgages with total estimated fair value of $52.9 million and $58.6 million as of December 31, 2016 and 2015, respectively.
The amortized cost and estimated fair value of securities as of December 31, 2016, by contractual or expected
maturity, are shown below. Collateralized mortgage obligations are included in the table shown below based on their expected
maturities. Mutual funds do not have contractual maturities. However, they are included in the table shown below as over ten
years since the Company intends to hold these securities for at least this duration. All other securities are included based on their contractual maturities.
 
Available for Sale
 
Amortized
Cost
 
Estimated
Fair Value
 
(In thousands)
Within one year
$
337

 
$
337

Over one year through five years
78,893

 
78,747

Over five years through ten years
212,719

 
211,025

Over ten years
229,104

 
226,855

Total
$
521,053

 
$
516,964


FASB ASC 320, “Investments – Debt and Equity Securities,” requires us to periodically evaluate our investments for other-than-temporary impairment (“OTTI”). There was no OTTI charge during the year ended December 31, 2016.
Gross unrealized losses on securities available for sale, the estimated fair value of the related securities and the number of securities aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, were as follows as of December 31, 2016 and 2015: 
 
Holding Period
 
Less Than 12 Months
 
12 Months or More
 
Total
 
Gross
Unrealized
Loss
 
Estimated
Fair Value
 
Number of
Securities
 
Gross
Unrealized
Loss
 
Estimated
Fair Value
 
Number of
Securities
 
Gross
Unrealized
Loss
 
Estimated
Fair Value
 
Number of
Securities
 
(In thousands, except number of securities)
December 31, 2016
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Mortgage-backed securities
$
1,345

 
$
102,647

 
38

 
$
112

 
$
11,350

 
3

 
$
1,457

 
$
113,997

 
41

Collateralized mortgage obligations
676

 
60,786

 
27

 
326

 
10,579

 
7

 
1,002

 
71,365

 
34

U.S. government agency securities
58

 
7,441

 
3

 

 

 

 
58

 
7,441

 
3

SBA loan pool securities

 

 

 
210

 
4,146

 
2

 
210

 
4,146

 
2

Municipal bonds-tax exempt
1,995

 
125,004

 
54

 

 

 

 
1,995

 
125,004

 
54

Municipal bonds-taxable
9

 
2,904

 
2

 

 

 

 
9

 
2,904

 
2

Mutual funds
413

 
21,478

 
4

 
109

 
916

 
3

 
522

 
22,394

 
7

Total
$
4,496


$
320,260


128


$
757


$
26,991


15


$
5,253


$
347,251


143

December 31, 2015
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Mortgage-backed securities
$
1,734

 
$
193,931

 
52

 
$
727

 
$
21,659

 
9

 
$
2,461

 
$
215,590

 
61

Collateralized mortgage obligations
335

 
48,970

 
18

 
662

 
32,964

 
13

 
997

 
81,934

 
31

U.S. government agency securities
201

 
23,289

 
8

 
455

 
24,533

 
8

 
656

 
47,822

 
16

SBA loan pool securities
161

 
50,499

 
12

 
250

 
7,036

 
3

 
411

 
57,535

 
15

Municipal bonds-tax exempt
19

 
8,922

 
6

 

 

 

 
19

 
8,922

 
6

Municipal bonds-taxable
88

 
7,106

 
4

 

 

 

 
88

 
7,106

 
4

Corporate bonds
24

 
4,994

 
1

 

 

 

 
24

 
4,994

 
1

Mutual funds
66

 
21,820

 
3

 
97

 
928

 
3

 
163

 
22,748

 
6

Total
$
2,628


$
359,531


104


$
2,191


$
87,120


36


$
4,819


$
446,651


140


All individual securities that have been in a continuous unrealized loss position for 12 months or longer as of December 31, 2016 and December 31, 2015 had investment grade ratings upon purchase. The issuers of these securities have not established any cause for default on these securities and the various rating agencies have reaffirmed these securities’ long-term investment grade status as of December 31, 2016 and December 31, 2015. These securities have fluctuated in value since their purchase dates as market interest rates have fluctuated.
FASB ASC 320 requires other-than-temporarily impaired securities to be written down when fair value is below amortized cost in circumstances where: (1) an entity has the intent to sell a security; (2) it is more likely than not that an entity will be required to sell the security before recovery of its amortized cost basis; or (3) an entity does not expect to recover the entire amortized cost basis of the security. If an entity intends to sell a security or if it is more likely than not the entity will be required to sell the security before recovery, an OTTI write-down is recognized in earnings equal to the entire difference between the security’s amortized cost basis and its fair value. If an entity does not intend to sell the security or it is not more likely than not that it will be required to sell the security before recovery, the OTTI write-down is separated into an amount representing credit loss, which is recognized in earnings, and the amount related to all other factors, which is recognized in other comprehensive income.
The Company does not intend to sell these securities and it is more likely than not that we will not be required to sell the investments before the recovery of its amortized cost basis. In addition, the unrealized losses on municipal and corporate bonds are not considered other-than-temporarily impaired, as the bonds are rated investment grade and there are no credit quality concerns with the issuers. Interest payments have been made as scheduled, and management believes this will continue in the future and that the bonds will be repaid in full as scheduled. Therefore, in management’s opinion, all securities that have been in a continuous unrealized loss position for the past 12 months or longer as of December 31, 2016 and December 31, 2015 were not other-than-temporarily impaired, and therefore, no impairment charges as of December 31, 2016 and December 31, 2015 were warranted.
Realized gains and losses on sales of securities and proceeds from sales of securities were as follows for the periods indicated:
 
Year Ended December 31,
 
2016
 
2015
 
2014
 
(In thousands)
Gross realized gains on sales of securities
$
396

 
$
6,776

 
$
2,012

Gross realized losses on sales of securities
(350
)
 
(165
)
 
(1
)
Net realized gains on sales of securities
$
46


$
6,611


$
2,011

Proceeds from sales of securities
$
78,282

 
$
456,098

 
$
169,533


For the year ended December 31, 2016, there was a $46,000 net gain in earnings resulting from the redemption and sale of securities that had previously been recognized as net unrealized losses of $314,000 in comprehensive income. For the year ended December 31, 2015, there was a $6.6 million net gain in earnings resulting from the redemption and sale of securities that had previously been recorded as net unrealized gains of $1.9 million in comprehensive income.
Securities available for sale with market values of $133.0 million and $72.0 million as of December 31, 2016 and 2015, respectively, were pledged to secure FHLB advances, public deposits and for other purposes as required or permitted by law.